The City of Mirada wants to offer cable television to its residents in 2009. The city has approached a company called CableVision to run its cable operations. After negotiating with key parties, CableVision has made the following agreements:
* Mirada will offer its residents a basic set of 25 cable television stations at a rate of $32.49 per month (all of the revenue will go to CableVision).
* The City of Mirada will maintain the physical facilities, and CableVision will pay the city $1,400,000 per year plus $3.75 per cable subscriber per month.
* CableVision will actually pay another company to broadcast the 25 channels and will pay this company a monthly fixed fee of $60,000 plus a monthly amount of $8.25 per cable subscriber per month.
CableVision will incur additional operating costs for billing, program news mailings, etc. These costs will include a fixed component of $120,000 per month, and a variable component of 7.0% of monthly revenue.
CableVision has several questions about its monthly revenues, costs, and profits in 2009.
REQUIRED [ROUND YOUR ANSWERS TO PART A, QUESTION 1 AND PART C, QUESTION 8 TO THE NEAREST CENT; ROUND ALL OTHER INTERMEDIATE COMPUTATIONS TO THE NEAREST UNIT OR NEAREST DOLLAR.]
Part A (6 tries; 7 points)
1. What is the estimated monthly contribution margin per cable subscriber for CableVision in 2009?
2. What are the estimated total monthly fixed costs for CableVision in 2009?
1 answer